Trade Theory and Foreign Trade

1
Trade Theory and Foreign Trade

• Lecturers
• Ing. Leopold Tanner, MSc. (Lectures)
• Ing. Lubo Smutka, Ph.D. (Seminars)
• Where can you find me?
• (smutka_at_pef.czu.cz,
• Faculty of Economics and Management,
• New building - door n. 352)

2
Organization of subject

• 14 lectures per semester (in reality only 12) 1
  lecture will take 90 minutes
• 14 seminars per semester (in reality only 13) 1
  seminar will take only 45 minutes

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Lectures

• Introduction to foreign trade theory (liberalism,
  protectionism, autarky)
• Comparative costs theory (absolute and relative
  costs)
• Basic theory of foreign trade (historical and
  present development monetarism,
  neokeynesianismus)
• Levels of integration (free trade zone, customs
  union, economic union, monetary union, political
  union)

4
Lectures

• European Union historical development (European
  Coal and Steel Community (ECSC), European
  Economic Community (EEC))
• European Union present and future development
• EU Lisbon strategy
• Knowledge economy, national programmes,
  transformation effect

5
Lectures

• International, regional, and national institution
  of foreign trade (WTO, OECD, WB, IMF, .)
• Balance of payment and balance of trade
• Capital/capacity account
• Equity foreign and portfolio investments
• Development venture capital
• Conclusion

6
Seminars

• Basic terminology of foreign trade,
• Source of information about foreign trade,
• Discussion of trade theory and development of
  foreign trade,
• Presentation of your seminar theses,
• Seminars will be based mainly on your personal
  activity the main aim of seminars is discussion
  nothing more nothing less

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Evaluation and Exam

• Exam consists of three partsgt
• 1 oral exam (50 )
• 2 seminar thesis (30 )
• 3 defence of your thesis (20 )

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Seminar Thesis

• You must choose one of the topics, which will be
  discussed during the lectures.
• You can work individually or in team (4 people in
  one team are maximum)
• 5 pages per person are minimum (please not more
  then 6 pages per person) (type size 12, line feed
  1,5 , times new roman)
• In the beginning of our next session we will be
  discussing your topics and composition of your
  teams

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Seminar Thesis

• Dead line for your project will be on Monday
  (18th of December 2006)
• Every group will present its topic during the
  seminars. Number of presentations will depend on
  number of groups.
• 1 presentation 20 minutes
• First presentation will be during the 3rd seminar
  (16th of October 2006)

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How much do you know about the Czech Republic?

• How much does Czech trade?
• What are the goods that the Czech Republic trades
  with other countries??
• What are the Czech Republics top trading
  partners?

11
Top ten imports into the Czech Republic (2005,
www.czso.cz)
12
Top ten exports from the Czech Republic
13
Top ten destinations of the Czech exports
14
Top ten sources of Czech imports
15
Understand the Czech Republics trade patterns

• What can you say about the Czech Republics trade
  patterns, according to the data presented above?
• Goods
• Trading partners
• Can you explain these patterns? What are the
  determinants?
• Why does the Czech Republic trade with foreign
  countries so intensively? Couldnt we just do
  everything by ourselves?
• Why does the Czech Republic import and export
  those goods? Why does the Czech Republic
  seemingly import and export goods listed under
  the same category?
• Why does the Czech Republic trade so much with
  those countries (EU members, Russia, USA and
  China)?

16
Dont worry if you cant answer all these
questions

• Because these are the things to be studied in
  this course!

17
Introduction
18
Chapter Organization

• Introduction
• What is International Economics About?
• International Economics Trade and Money

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Introduction

• Why study international economics
• nations are more closely linked
• through trade in goods and services
• through flows of money
• and through investment
• This course provides the concepts and analytical
  tools to help one understand those complex
  international economic phenomena and policy issues

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Introduction
Figure 1-1 Exports and Imports as a of U.S.
National Income
21
Introduction
Figure 1-2 Exports and Imports as of National
Income in 1994
22
What is International Economics About?

• Intl econ. deals with economic interactions
  occurring between nations.
• The role of governments in regulating intl trade
  and investment is substantial.
• Intl markets allow governments to discriminate
  against a subgroup of companies.
• governments also control the supply of currency.
• There are several issues that recur throughout
  the study of intl economics.

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What is International Economics About?

• 1. The Gains from Trade
• skepticism about imports, esp. those that can be
  produced domestically.
• however, theory says that countries gain from
  trading with each other.
• but the cross-country and within-country
  distributions of such gains matter, as
• Trade might hurt some groups within nations.
• understand the anti-globalization movement

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What is International Economics About?

• 2. The Pattern of Trade
• Climate/resources may determine trade pattern of
  many primary goods.
• But what about that of manufacture services?
• There are two types of trade
• Inter-industry trade (goods in different
  industries) depends on differences across
  countries.
• Intra-industry trade (goods in the same
  industries) depends on market size and occurs
  among similar countries.

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What is International Economics About?

• 3. How Much Trade?
• Many governments try to shield certain industries
  from intl competition, thereby restricting
  trade.
• What are the costs and benefits of protection,
  relative to free trade?
• Advanced countries
• Developing countries policies
• Import substitution
• export promotion industrialization.

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What is International Economics About?

• 4.The Balance of Payments
• Some countries run large trade surpluses.
• e.g. in 1998 both China and South Korea ran trade
  surpluses of about 40 billion each.
• Is it good to run a trade surplus and bad to run
  a trade deficit?
• 5. Exchange Rate Determination
• The role of changing exchange rates is at the
  center of international economics.

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What is International Economics About?

• 6. International Policy Coordination
• how to produce an acceptable degree of harmony
  among the international trade and monetary
  policies of different countries without a world
  government?
• 7. The International Capital Market
• risks associated with intl capital markets
• Currency depreciation
• National default